Meritz Securities said on the 30th that Taihan Cable & Solution's profitability in the first quarter of this year improved significantly from a year earlier thanks to strong performance in its core wire business and increases in LME copper prices and the exchange rate. It added that the improving profitability trend is likely to continue in the second quarter on the back of better industrial wire market conditions and higher margins in the ultrahigh-voltage order backlog. Taihan Cable & Solution closed at 51,200 won the previous day.
Taihan Cable & Solution's operating profit on a consolidation basis in the first quarter of this year was 60.4 billion won, up 122.9% from a year earlier. That was a 39.2% increase from the fourth quarter of last year.
Jang Jae-hyeok, an analyst at Meritz Securities, said, "Rather than interpreting the first-quarter earnings surprise solely as pure wire profitability improvement, a considerable portion should be seen as gains of a metal gain nature," adding, "Of the 18.4 billion won in excess profit versus estimates, about around 10 billion won came from the materials institutional sector, and the remainder appears to have come from profitability improvements in the wire institutional sector such as ultrahigh-voltage and industrial wires."
Jang said, "The materials institutional sector handles more than about 30,000 tons (t) of copper per quarter," explaining, "Unlike the ultrahigh-voltage institutional sector, which mostly fixes copper prices at the contract stage and hedges, its profit and loss is relatively more exposed to changes in copper prices."
Jang assessed that the ultrahigh-voltage institutional sector posted favorable results as recognition of high-margin projects was concentrated in the first quarter of this year. He also saw improvements in profitability for overseas ultrahigh-voltage projects and in margins on the order backlog.
Profitability gains are expected to continue in the second quarter of this year compared to last year. Jang forecast operating profit on a consolidation basis in the second quarter of this year at 37.0 billion won, up 29.5% from last year.
However, it was forecast that operating profit will decline quarter over quarter because recognition of high-margin projects, higher copper prices and exchange rate effects were reflected simultaneously in the first quarter of this year.
Jang said, "For the time being, the share price will react sensitively to whether earnings estimates for 2026–2027 are raised due to strong first-quarter results this year and to the visibility of orders for subsea and (HVDC) ultrahigh-voltage direct current transmission projects."